The deal will be financed through debt and a £140m placing, which represents 5pc of GKN’s market value.

However, shares in GKN soared following the announcement of the agreement as investors reacted positively to the company securing a long-term target at a lower-than-expected price.

In early trading, GKN shares rose 13pc to 210.10p.

Stephen Swanton, analyst at UBS, said: “We see the deal as more favourable than initially envisaged. This stems from the lower purchase price, some £200m below our expectations, and also an improved earnings outlook for Volvo.”